After GameStop and other ‘meme stocks’ saw large fluctuations in their stock price, the House and Senate have held a series of hearings to investigate and possibly legislate. Unfortunately, some lawmakers have eyed this high profile episode as an opportunity to advance long-standing priorities - including imposing a financial transaction tax (FTT). In response, every Republican Member of the House Financial Services Committee recently signed onto a resolution condemning the imposition of an FTT. Similarly, Representatives Patrick McHenry (R-NC) and Bill Huizenga (R-MI) introduced H.R. 1584, The Protecting Retirement Savers and Everyday Investors Act, which would block states from imposing FTTs on certain industry participants, and help provide certainty for investors, retirees, and taxpayers. NTU applauds those Republicans for their efforts to keep retail investing affordable, and accessible for all Americans.
An FTT is not a new idea. During the hearing regarding GameStop and online investing on March 17, Representative McHenry pointed out that some progressive lawmakers who push for this tax are “simply repackaging old outdated policy failures with the wrappings of whatever else is in the news this week.” Legislation, like the Wall Street Tax Act, recently reintroduced by Senator Brian Schatz (D-HI), illustrates this point. Proponents of this legislation say this is aimed at Wall Street investors, but Main Street investors will also face the burden. Similarly, attempting to categorize investing as just high risk, high frequency trading is incorrect. Over 50 percent of Americans -- more than ever before -- have a stake in the stock market. This was in part made possible by the lower costs associated with trading, including a payment-for-order-flow model that allows fee-free investing.
House Republicans on the Financial Services Committee are not alone in their opposition to this flawed tax proposal. NTU and nearly 30 other pro-taxpayer groups signed onto a letter to urge Congress not to make investing more costly for retail investors. Additionally, NTU Executive Vice President Brandon Arnold has spoken out on how this tax would hurt Main Street investors. An FTT discourages investors at all levels from trading individual stocks and would negatively impact 401(k)s and pension plans as well. Investors would not be the only ones suffering from an FTT though - the reduction in liquidity in capital markets would also be problematic for American businesses.
With a $1.9 trillion bill just signed into law, and with another possibly trillion-dollar infrastructure plan seemingly next on the agenda, it is not hard to guess why some lawmakers are searching for ways to raise revenue. However, it is a strange juxtaposition to pass a large stimulus because American workers and businesses are hurting during the COVID-19 pandemic, and then turnaround and impose a tax on investing that would hurt these same American businesses and workers. While proponents claim this tax will rake in over $700 billion in 10 years, the reality is this tax would raise substantially less and depress investments. A number of countries including Sweden, Germany, Japan, and the Netherlands have repealed their FTT in the last 25 years.
The imposition of an FTT is a “solution” searching for a problem. It is highly doubtful the imposition of this tax would significantly address market volatility, nor would it raise the revenue proponents project. House Republicans’ firm stance against this tax is a positive step toward helping ensure more Americans are able to invest in their future, and we urge Democrats to join them. As Congress works to ensure businesses are able to keep their lights on, it should not disincentivize investment in American enterprise or increase barriers to trading for retail investors.